This article discusses the current European economic situation. The first paragraph of the article perfectly describes what europe must do to regain economic confidence and stability. In reality, they must come up with a system that puts more confidence and weight on the euro, as well as giving up control of budgets to a European authority like the European Central Bank.
The article focused on Europe's media forerunners for economic crises, including Spain, and Greece.
http://finance.fortune.cnn.com/2012/02/06/whats-next-for-europe/?iid=SF_BN_River
3 comments:
An interesting part of this article to me is when it discusses how each member state of the EU must be willing to submit their budgets to a central authority who has the power to tell them they can’t afford it and how the pact would force governments to pay fines to the EU if they exceeded certain debit limits. This government intervention seems similar to a government intervention for a negative externality, such as pollution. For example, firms report to regulators the amount of pollution they are emitting and firms have to pay fines if they exceed the capped limit of pollution. It is also interesting to see how certain countries, like Greece, are opposed to a pact like this. Yes, the pact would cause a loss of national sovereignty for countries, but if they aren’t going to make changes to improve their economy, then someone has to step in and do it for them.
The European Central Banks' long-term refinancing offering saw almost 500 billion Euro into the banking system at one time. What would be the advantages of offering a lump some rather than offering the cash over a set period of time?
It amazes me that Europe has unified so much in so little time. If you approach it from a historical perspective, Germany and Italy didn't even unify as states until the late 19th century. Shortly after that, the continent was engaged in two world wars and then was split by "the Iron Curtain". This has all happened in the last 150 years. So the EU is really quite novel in its globalized perspective. While I think that a fiscal union is the best choice for the EU's survival, I think that the nations will be unwilling to give up their nationalistic ideals. I expect to see the crisis grow in intensity. At that point, I think France and Germany will take dramatic steps back to keep their economies from collapsing.However, I hope changes can be made to avoid this.
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